MonitorsPublished on May 07, 2008
Energy News Monitor |Volume IV, Issue 47
Will Power Shortages become a Thing of the Past by 2012? (part – II)

Continued from Issue No. 46…

The CEA has used ‘aspirations’ for tomorrow to make projections for electricity demand.  For the 11th Plan key ‘aspirations’ are to increase per capita electricity consumption to developed country levels and to provide electricity to all by 2012.  This means making more electricity available for existing consumers and offering the availability of unconnected consumers in rural areas.  In general CEA projections for peak load have proved to be high at the national level and also for some States.  A review of the demand forecast from 1995 to 2002 shows that demand projections have been 15-20 percent higher than actual demand. For some States with low industrialization the gap between projections and actual load requirement has been very large. The ratio of peak demand and off-peak demand varies up to 150 percent over a short period (daily basis) and 200 percent over longer periods (monthly or yearly basis) in the All India system.  A sudden jump in peak load has been noticed in States with high industrialization, agriculture or commerce like Maharashtra, Punjab, Gujarat and Andhra Pradesh.   The regional load curve reveals that the high peak persists for short periods of less than half an hour on average contributing to 5 percent of peak demand whereas the second peak persists for over 4 hours a day contributing to 95 percent of peak demand which is the real system peak.

Power Supply Position in 2006-07: Peak Shortages


peak demand

in mw

peak availability

in mw


in MW

as %





















N East










All India





Power Supply Position in 2006-07: Energy Shortage


Energy require –ment in MU

Energy availabili –ty in MU


in MU

as %





















N East








- 68


All India





Supply Projections

Capacity addition projections for generation by the Government in the 11th plan are as optimistic as demand projections. 

Guidelines used in projections on Generation Capacity additions

·    Projects already taken up for execution in the 10th plan but due for commissioning in the 11th plan.

·    Thermal projects by State and Central government generators for which Letter of Approval (LoA) is available

·    Thermal projects from private developers which have achieved financial closure

·    Thermal projects for which LoA is expected by September 2008 and commissioning expected by 2012. 

·    Hydro projects which have received concurrence from the CEA and have placed orders for the main packages

·    Small hydro projects for which project gestation is less than 5 years

·    Gas projects which are under execution and those projects for which gas supply has been tied up

Generation Capacity addition plans for the 11th Plan in MW









projects under























Note: The above projections do not include merchant power plants that might come up during this period. 

Sector-wise break up of capacity addition during 11th Plan in MW
































All India








Growth Rates

As per the CEA, Electrical Energy Consumption, Electrical Energy Requirement and the Annual Peak Electric Load are estimated to increase by roughly 200 percent over their 2003-04 levels. 

All India Growth

The growth rates assumed for the future are much greater than the actual rates achieved in the same period in the past.  Given the fact that average economic growth rates have been higher than those in the past and are expected to continue to be high in the future, high consumption growth rates may be justified.  Erring on the positive side may not be as bad as erring on the negative side.  CEAs figures do not take into account capacity 10,000-15,000 MW of merchant power and 10,000 MW of captive capacity which may come up by 2020 which could mean that actual capacity additions may exceed targets.





CAGR Actual

1993-04 to 2003-04

CAGR Projected

2003-04 to


Electrical Energy Consum-ption in GWh






Electrical Energy Require-ment in GWh






Energy Require-ment in GWh







The targets present an optimistic picture of the future but that does not mean that India will be free from power shortages by 2012. Historically capacity addition plans have rarely met plan targets.  In the 10th plan period (2002-07­) out of over 40,000 MW of planned capacity addition roughly 21,000 MW was commissioned during the plan period.  Out of this over 79 percent was from capacity ordered before commencement of the plan period.  None of the Hydro projects initiated during the 10th plan were commissioned before the end of the plan period.  But even analysts who have been skeptical in the past feel that ‘this time is different’ and point to the speed with which Ultra Mega Power Projects are achieving financial closure.  For generation capacity to translate into electricity availability, substantial investments have to be made in transmission and distribution.  In the absence of such investments regional imbalances are likely to continue.



Energy Team,  ORF                                                              

China’s Approach to Securing its Energy Supplies and Implications   (part – II)

(Statement of Mikkal E. Herberg Research Director, Asian Energy Security Program, The National Bureau of Asian Research, before the U.S.-China Economic and Security Review Commission)



Continued from Issue No. 46…

Does Beijing’s Approach Encourage or Impede Cooperation?

As described above, Beijing’s focus has been on a relatively “go-it-alone” approach to meeting its oil supply needs, with an emphasis on bilateral energy relations often including significant political, trade, and aid components, and reliance on investments abroad by its own state-owned NOCs to meet future oil security needs.  This has certainly contributed to a more politicized and competitive environment, both regionally in Asia as well as globally, regarding access to and control over long-term oil and gas supplies.  It has added to the zero-sum atmosphere that exists among today’s oil importing and consuming countries. 

At the same time, Beijing has relegated regional or multilateral approaches to energy security to the back burner and often simply “lip-service”.  Moreover, in terms of domestic energy policy, Beijing until very recently has focused very little attention on energy conservation, improving energy efficiency, or reducing the rate of growth of oil and energy demand.  This has limited prospects for energy cooperation with the U.S. or other Asian countries on energy efficiency and demand management efforts.

However, China’s approach to energy security shows some signs of evolving gradually toward a more cooperative posture for a number of reasons. Most importantly, there is a growing perception among key policy advisors in Beijing that the current strategy is not fundamentally improving China’s energy security.  Oil demand and need for oil imports is simply growing too quickly to be met effectively through equity investments by China’s NOCs and bilateral deals with producing countries.  Demand is growing roughly 500 thousand barrels per day (MBD) annually, almost all of which will have to be met with imported oil.

In five years China will be importing 6 million barrels per day (MMBD), compared to today’s 3.5 MMBD. At best, China’s NOCs expect to add perhaps a total of 500 MBD to their equity production in that five year period.  The realization is growing that China’s future oil supplies and security are ultimately tied to market access to crude oil rather than ownership of crude oil.  This inevitably is leading policy advisors in Beijing to suggest that policymakers begin focusing on the stability of the global oil market, stability of supplies, and unimpeded access to long-term contract crude supplies as the key to China’s energy security, rather than outright ownership and control.Global market stability is impossible without international cooperation.  

Related to this point, there is a growing sense in Beijing that the investment interests of China’s NOCs in expanding abroad are not necessarily synonymous with China’s national energy security interests.  For example, the reality is that most of the oil produced by China’s NOCs abroad is not shipped back to China, it is sold into the global market in the same way other global commercial oil companies do. 

The crude shipped to China reflects its particular value in China’s refining system which needs mainly light, sweet crude.  There is growing discussion that, while China should have strong, globally-competitive national oil companies commensurate with other global powers, China’s energy security interests do not require heavy state support or unnecessarily controversial financial and diplomatic support for their NOCs.    

In broader foreign policy terms, there also seems to be some recognition that the atmosphere of zero-sum energy competition is creating serious and potentially unnecessary collateral foreign policy disputes with key powers, most importantly the U.S. and Japan. 

While there remain suspicions about the long-term energy in intentions of both the U.S. and Japan, there are concerns among those responsible for China’s broader foreign policy interests that energy disputes are unnecessarily complicating these important diplomatic relationships.

Moreover, there appears to be some growing realization that as China seeks to reassure other world powers that China’s rise will be peaceful and non-threatening to the world, that one area where China can begin demonstrating a more a responsible posture, a “responsible stakeholder”, is in the management of the global energy system.  

A final key change that is occurring in Beijing is a growing recognition that domestic energy policy in China, particularly regarding oil and coal use, needs to focus much more intently on energy conservation, improving efficiency, and demand-side reforms. 

Energy policy has traditionally been heavily supply-side driven, which partly explains the emphasis on accessing oil supplies abroad rather than addressing rapidly rising demand domestically. This is changing rapidly toward an understanding that demand cannot continue to grow on its current trajectory without disastrous environmental, infrastructural, and health consequences.  This opens the door widely to a new interest in international cooperation on energy.     

The result of all these underlying trends is that there appears to be the beginnings of a sense in Beijing that international energy cooperation is in China’s interest. 

For example, China has become gradually more engaged and forthcoming with the IEA on its development of Strategic Petroleum Reserves.  In recent meetings it has suggested that it was favorably inclined on issues such as coordinating strategic stock releases with the IEA during global market disruptions. This is new. Last December, China convened a Ministerial-level meeting of the major Asian energy importing countries, including the U.S., Japan, South Korea, and India to discuss common approaches to the importing countries’ energy security concerns. 

In recent bilateral meetings with the U.S., both the SED and the Energy Bilateral, China has expressed growing interest in energy cooperation with the U.S. on coal, natural gas, and oil issues. Beijing has also recently begun make new efforts to resolve energy disputes with Japan, in particular a long-running dispute over natural gas fields in the East China Sea.  Recent China-Japan bilateral energy discussions also made substantial new progress on cooperation on energy technology, efficiency, and energy/environmental issues. In Southeast Asia, China has begun to show a more cooperative regional approach to maintaining the security of regional sea lanes and the Straits of Malacca from the threats from piracy and terrorism.

It would be premature to say that China’s approach to energy security and energy cooperation has changed decisively from its “go-it-along” pattern of the past decade.  However, there are significant indications that policy is evolving toward a policy that recognizes that the stability of the global market and reliable transport flows are more important than trying to carve out its own secure energy supplies and supply-lines unilaterally. As this develops, it is likely to lead to policies that increasingly support market stability through global and regional energy cooperation.

Consequently, it is vital that the U.S. re-double its efforts to engage China across the board on energy cooperation internationally and bilaterally in order to encourage the positive evolution of these policies.

Energy, Pipelines, and China’s Land-based Neighbors

China sees its land-based neighbors in Eurasia as key sources of oil and natural gas supplies that can help diversify China’s growing dependence on these seaborne supplies of both oil and LNG.  Russia, Kazakhstan, and Turkmenistan are all potentially large suppliers of oil or natural gas to China and the rest of Asia and the logistics of pipeline transport favor much of that oil and gas moving to China.   

For this and many other strategic reasons, China has worked assiduously over the past decade to establish closer energy and diplomatic ties with Russia and the key Central Asian energy rich states.  Many analysts have expected energy to become one of the main sinews to cement a strong set of strategic ties between China and Russia and between China and Kazakhstan.  For the U.S., the idea that China and Russian strategic ties would strengthen as a result of a strong energy alliance raised questions of the implications of Eurasia’s two major powers increasingly closely aligned in policies potentially seeking to reign in U.S. power in influence in Asia and globally. 

In reality, energy investment and trade have indeed helped cement improving strategic relations between China and Kazakhstan. China’s NOCs have acquired several major oil production assets since the mid-1990s and now control nearly 25% of Kazakhstan’s crude oil production.  The first leg of a major oil pipeline from western Kazakhstan to China’s western border was completed last year and is currently delivering 200 MBD, with expansion plans to take the pipeline to 400 MBD over the next few years.

China also has signed a Strategic Energy Alliance with Kazakhstan. In the next 20 years, it is possible that up to 1MMBD of crude oil could flow to China by pipeline from Kazakhstan,. However, market drivers suggest most of Kazakhstan’s crude is more likely to flow west through the CPC pipeline to the Black Sea with new supplies from the Kashagan offshore field due to come in the next several years going into an enlarged Baku-Ceyhan pipeline to the Mediterranean coast. 

Both sides have also recently discussed a potential natural gas pipeline to China as Kazakhstan’s gas production ramps up over the next 5 years of field development. All of this has led to a strong strategic relationship with Kazakhstan, encompassing energy cooperation, military cooperation, and growing trade and investment.   

However, the Sino-Russian energy relationship has been tortured and fraught with cross-currents of competition, suspicion, and Russian energy policy paralysis and, hence, has done little to bring the two Eurasian powers closer together, yet. China has been receiving 250 MBD of crude oil delivered by rail over the past several years and these volumes are contracted to increase gradually, assuming Russia invests in expanding its Far Eastern rail capacity.

Russia has finally, apparently, begun to build a long-promised oil pipeline from Angarsk to a point near the Chinese border, but details on that remain very sketchy.  But Russia’s repeated promises to build gas pipelines to China have been stalled by the re-centralization and re-nationalization of much of the oil and gas industry during the Putin era which has paralyzed major new projects in East Siberia and Sakhalin Island.  This includes both Sakhalin Island projects and the Irkutsk gas project in Eastern Siberia. 

Second, even where the Kremlin has had unchallenged control of gas resources in Western Siberia, it has failed to follow-through on repeated promises, made as recently as March 2006 by President Putin in Beijing, to build a major West Siberian gas pipeline to China.  China has also been rebuffed several times when it tried to make equity investments in producing oil assets in Russia, only recently finally successful in gaining control of Urdmurtneftgas in a recent auction.  Finally, Russia has become a major obstacle to China’s hopes to access potential pipeline gas from Turkmenistan and Kazakhstan. 

In a recent deal Russia has locked up large future supplies of gas from both countries to move north to Russia, which is likely to leave insufficient gas supplies to justify a gas pipeline east to China.   

So Sino-Russian energy relations have been rocky, at best, despite the natural strategic resource fit.  Over the long-run, however, the logic of more oil and gas moving from Russia to China are compelling and volumes are likely to grow.  The question is how much and at what pace of growth.     

Therefore, in China’s straightforward energy security calculus, it is likely that Russia and Eurasia will be important future suppliers of both oil and gas and should help diversify China’s sources of oil and gas imports. However, these supplies are likely to only marginally reduce China’s dependence on seaborne oil and gas imports. 

Most forecasts suggest a range of oil exports from Kazakhstan over the next 20 years of possibly up to 1 MMBD, but more likely in the range of 500 MBD since most Kazakh oil exports are likely to move west to markets in Europe. Russia could potentially export 1-2 MMBD to China in 20 years, but most likely in the 1 MMBD range given the somewhat less robust oil reserve picture in East Siberia and the Russian Far East. 

Most likely combined would be in the 1.5-2.0 MMBD range in 20 years.  Alternatively, on current trends, in 20 years China is likely to be importing roughly 10-12 MMBD worldwide. So an important source of supply and an important source of transport diversification, certainly, particularly as it will mainly be by overland pipeline rather than seaborne supplies. 

Another small increment of oil imports could avoid the Malacca Straits through a proposed oil pipeline through Myanmar that may or may not get built. Nevertheless, China’s dependence on seaborne supplies from the west, mainly the Middle East, transiting the Malacca Straits will remain profound, accounting for a minimum of 70-75% of China’s oil imports.   




Courtesy: The National Bureau of Asian Research






ONGC sets up pilot plant to extract helium

May 13, 2008. The Oil and Natural Gas Corporation (ONGC) launched India's first pilot plant to extract helium from natural gas at Kuthalam in Nagapattinam district. The pilot project was launched with the technical assistance from Saha Institute of Nuclear Physics and the Department of Science and Technology, Government of India. The entire requirement of helium (around 180,000 cubic metre a year) in India is currently met through imports at a cost of nearly US $2 per cubic metre. The supply-demand imbalance in global market could grow into a big crisis. According to the compony this pilot plant could play a significant role in ensuring the energy security of the nation. The company has set up the plant with an initial investment of Rs 6.5 crore ($1.5 mn).

ONGC insures offshore installations for FY'09

May 9, 2008. ONGC has insured its offshore installations at annual gross premium of $29.025 mn for 2008-09. The premium for the Offshore Package Insurance Policy for the company is almost at the same gross premium as last year despite an overall upward revision of around 32 pc in the insured asset value -- from $15.89 bn to $21 bn. The renewal programme was managed by United India Insurance Company (UIIC), who led the consortium of nationalised insurance companies comprising UIIC, NIAC, OICL and NIC. ONGC policy is reinsurance driven with a major portion of risk being reinsured in International Reinsurance Market and risk retention in the India Insurance Market being 10-13 per cent. ONGC's major critical offshore operational assets -- production complexes, well-head platforms, pipelines, trunklines, drilling rigs, multipurpose support vessels, specialised vessels, third party liabilities and operational risks -- are insured under a comprehensive Energy Offshore Package Insurance Policy for a Combined Single Limit (CSL) of $750 mn for any one accident/one occurrence.

Nelp VII deadline extended to June 30

May 7, 2008. The deadline for submission of bid for oil and gas exploration blocks under the seventh round of the New Exploration and Licensing Policy (Nelp VII) has been extended till June 30 from May 16 as there is still no clarity from the finance ministry on whether gas production is eligible for an income-tax holiday. Bidding for the 57 blocks on offer under Nelp VII was originally supposed to close on April 11. However, this was extended to April 25 and then to May 16. In the Budget 2008-09, the finance ministry proposed to withdraw the tax benefit given to the companies under Section 80 IB (9). The income-tax department's argument is that the tax benefit is meant only for oil production and not for gas. According to the Finance Ministry the decision on the tax holiday would be taken by the various courts and tribunals hearing the issue, which would reach a decision within a year. Oil and gas companies say that due to the lack of clarity on the tax holiday they have not yet been able to firm up their bids. Most companies are preparing two bids — one in a tax holiday scenario and the other in a scenario where the tax holiday is withdrawn. Of the 57 blocks on offer, 39 have been recycled from previous Nelp rounds. These blocks were relinquished by the companies as they did not find any oil or gas or were not able to complete their minimum work programmes on the block.

ONGC`s Bassein output likely to halve by 2012

May 7, 2008. ONGC is likely to see the output from its largest gas field in Mumbai offshore fall to half by 2012 as natural decline sets in the 20-year-old field. Gas production from Bassein and its satellite fields will dip to 5,040 million standard cubic meters (about 13.8 million standard cubic meters a day) in 2011-12 from 10,129 million standard cubic meters (27.5 mmscmd) in 2007-08. The reservoir pressure at the gas field has declined, with continuous production for over 20 years. Bassein field was discovered in 1977, some 80 kms west of Mumbai. When the gas production began in 1988, recoverable reserves were estimated at 226 billion cubic meters (7.98 trillion cubic feet). The reserves are now estimated at about 58 billion cubic meters (2.04 tcf). The Bassein field accounts for 45 per cent of ONGC's gas production. Gas output from the field is estimated at 27.3 mmscmd in the current year and will fall to 22.75 mmscmd in 2009-10 and to 17.7 mmscmd in 2010-11.

The gas production from Mumbai High will decline from 5,328 million standard cubic meters (14.59 mmscmd) in 2007-08 to 3,188 million standard cubic meters (8.7 mmscmd) in 2011-12, while the output from Neerlam, Heera and B-173 fields would dip from 2.7 mmscmd to 2.06 mmscmd. ONGC expects to make up some of the decline by operationalizing new and marginal fields that will produce one mmscmd gas in the current year and scale it up to 13 mmscmd in 2011-12. Meanwhile, ONGC has decided to invest Rs 35.7 billion to maintain oil and gas production from its existing fields. The state-run exploration company also made seven new oil and natural gas discoveries last month. Three of the new discoveries are from exploratory wells and four new pools from development wells. Most of ONGC's producing fields have matured and are now depleting, forcing the company to undertake major revamping to maintain hydrocarbon production.


High crude prices puts brakes on ONGC's retail plans

May 13, 2008. Following the Government’s decision to compensate only IndianOil, Hindustan Petroleum and Bharat Petroleum for under recoveries, the Oil and Natural Gas Corporation has put its retail outlet plans (under the brand OVAL) on the backburner. Originally, ONGC was permitted to have 1,100 retail stations, while its subsidiary MRPL (Mangalore Refinery and Petrochemicals Ltd) was approved 500 outlets. Currently, ONGC has only one outlet, which is run on a trial basis at Mangalore. The company is of the view that with the crude oil prices soaring, the company would incur losses by opening more outlets.These comments come on the back of RIL closing down its fuel stations to offset the rising losses. Opening fuel stations is not commercially viable because the government compensates only oil marketing firms such as Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum for under-recoveries. Under-recoveries are the losses incurred by oil companies for selling fuel at subsidised prices.

RIL, Essar Oil eye Kakinada refinery

May 8, 2008. After the UK-based Hinduja group, ONGC’s proposed Rs 26,500-crore ($6.3 bn) refinery at Kakinada, Andhra Pradesh, has found new suitors in Reliance Industries (RIL) and Essar Oil. This is despite ONGC maintaining its stand that the refinery is not financially feasible unless the Andhra Pradesh government gives it more incentives. The 15 million tonne per annum (mtpa) refinery will be implemented by Kakinada Refinery and Petrochemicals (KRPL). While ONGC's subsidiary Mangalore Refinery and Petrochemicals (MRPL) holds 26 per cent stake in KRPL, IL&FS holds 51 per cent and the remaining stake is held by the Andhra Pradesh government. Essar Oil, RIL and Hindujas have been in discussions with the Andhra Pradesh government for a stake in the Kakinada refinery. Both RIL and Essar Oil operate mega refineries in Gujarat. The refinery is proposed to be set up in a special economic zone (SEZ) being developed by ONGC in Kakinada. Land for the SEZ has already been acquired. The fact that the refinery will come up in an SEZ is attracting interest from various companies since it will get various tax incentives. Companies keen on a stake say the refinery is feasible as the products can be exported to Southeast Asian countries. Moreover, there are plans to construct a one-million-tonne-per-annum petrochemical plant alongside the refinery.

According to RIL the petrochemical plant will add value as the petrochemicals margins are expected to remain strong till the end of 2013. and it expects the margins to remain positive even during the expected downturn in the petrochemical industry after 2013. ONGC has, however, sought incentives worth Rs 16,000 crore ($3.8 bn) from the Andhra Pradesh government over eight years to make the refinery financially viable. ONGC wants exemption from sales tax on the sale of petroleum and petrochemical products, free power and water supply during the construction phase, and road and rail connectivity. ONGC, which has often been asked by the petroleum ministry to focus on its core business of exploration and production, says that it is only the incentives, along with the petrochemical plant, which will make the refinery feasible. The Andhra Pradesh government, however, has been lobbying with the central government saying the refinery is feasible.

Transportation / Trade

GAIL to buy spot LNG cargo  

May 13, 2008. Indian gas firm GAIL India plans to buy five to six liquefied natural gas (LNG) cargoes from the spot market in the last quarter of fiscal 2008/09 to fire its Dabhol power plant. GAIL’s 5 million tonne (mt) LNG terminal will be mechanically ready by September-October, and will be ready to receive LNG cargoes during January-March.The company would float a tender to buy the LNG and each cargo would have 135,000 cubic metres of gas.

MOL picks 35 pc stake in ONGC

May 9, 2008. Budapest-based MOL Hungarian Oil and Gas Plc has taken a 35 per cent stake in Oil and Natural Gas Corporation's onshore exploration block in the Himalayan foothills. MOL will take stake in block HF-ONN-2001/1. Block HF-ONN-2001/1 that ONGC had won in the third round of bidding under New Exploration Licensing Policy (NELP) has an aerial extent of 1,513 square kilometres. MOL has experience of working geologically complex fold belt areas in similar geological setting in Pakistan and has made discoveries. After the farm-out, one exploration well is planned to be drilled in block HF-ONN-2001/1 by end of 2008 and another later. The proposed assignment of Participating Interest (PI) by ONGC to MOL is a part of strategic alliances ONGC wants to have with internationally renowned and experienced Companies for exploration. Under this strategic initiative, ONGC has already approached the government for assignment of PIs in exploration blocks under NELP to affiliates of ENI of Italy, Petrobras of Brazil, StatHydro of Norway and UK's British Gas. MOL is a fully-integrated petroleum company with operations covering exploration and production and downstream. MOL is a leading oil industry player in Hungary and Slovakia and has growing business ties with Western Europe, Russia and the Middle East. According to the MOL the farm-out agreement with ONGC is a part of MOL's strategy to build a well-balanced portfolio.

Reliance ready to offer market value for land use

May 9, 2008. Reliance Gas Transportation and Infrastructure Company (RGTIL) informed the Supreme Court that it was ready to compensate farmers at market rate for right to use land for laying a pipeline to transport natural gas from Krishna-Godavari basin to Gujarat. The company had approached the apex court in March challenging the Andhra Pradesh High Court's order that stalled the construction of the pipeline. The company made the statement that it was ready to settle the matter with the farmers and was ready to offer them market value. The company will start pumping of gas in July.

MRPL set to seal 0.25 mt Iran diesel deal

May 7, 2008. Indian refiner MRPL will soon conclude a deal to sell 250,000 tonnes of diesel to Iran over the next eight months replacing Reliance Industries as a major supplier to the OPEC member. MRPL sold its first spot cargo to Iran last month as the Iranian National Oil Co sought new suppliers after India's Reliance halted sales. Reliance's bankers refused to confirm letter of credit raised by Iran's central bank due to increasing Western pressure over Tehran's nuclear programme. MRPL will supply one parcel each month. Iran is forced to import motor fuels due to a lack of production from its aging refineries, and this winter bought diesel from as far afield as Singapore after Reliance stopped supplies in the second half of last year. MRPL annually imports around 120,000 bpd crude from Iran for use at its 194,000 barrels-per-day coastal refinery in the southern Indian state of Karnataka, but its supply agreement would remain separate from the diesel deal. Although Western pressure has made it more difficult for some Companies to finance trade with Iran, Tehran has been able to maintain a steady flow of imports from a host of suppliers by making alternative credit arrangements.

Policy / Performance

SC stays ONGC bidding process on B-22 oil field

May 13, 2008. In a relief to construction major Larsen and Toubro, the Supreme Court stayed the Delhi High Court order that directed ONGC to consider Malaysia-based Ramunia Fabricators Sdn Bhds' bid for development of B-22 oil field in Mumbai offshore. The court while issuing notice to ONGC, Ramunia Fabricators and its Hong Kong-based subsidiary also restrained the state-run exploration major from taking any action in considering the bid. L&T alleged that the High Court should not have asked the state-run exploration major to consider Ramunia's bid despite the fact that it violated the mandatory and essential terms of the tender. According to Larsen and Toubro (L&T) while Malaysia-based Ramunia Fabricators Sdn Bhd had submitted its bid pursuant to ONGC's decision to invite bids in May 2007 for its B-22 field development project, the tender documents were submitted by its Hong Kong company- Ramunia Fabricators. According to the construction major, the Notice Inviting Tenders clearly specified that the bidding documents were non-transferable and should be submitted only in the name of the bidder or a consortium led by the bidder in whose name the biding documents were issued. In such a case, according to the construction company, such bids were liable to be rejected and the bid security was liable to be forfeited.

Govt stand differs on pricing of RIL gas to RNRL, NTPC

May 13, 2008. The government has adopted a dual stand on gas sales from Reliance Industries (RIL’s) Krishna Godavari (KG) basin to Reliance Natural Resources (RNRL) and the sales to its own company NTPC. In a rejoinder filed in the Bombay High Court for the ongoing RNRL-RIL case seeking vacation of the stay on Mukesh Ambani-run Reliance Industries for selling gas to third parties, the government has said that the price fixed in the year 2004 cannot be taken as the basis for the prevailing price and it has no approval of the government. The same rejoinder also states that as far as NTPC-RIL case is concerned, the government is only concerned with the valuation of the gas sold at which government entitlements, royalty, profit petroleum and taxes will be determined. This rejoinder was filed with respect to RNRL’s reply stating that government has no role in the gas settlement dispute between RIL and RNRL. The government had earlier filed an application for being a party to the case between RIL and RNRL on April 28. The government’s rejoinder raises serious doubts over NTPC getting gas at $2.34 per mmbtu from RIL because in 2006, the government had rejected RIL’s proposal to sell gas to RNRL at price of $2.34 per mmbtu. This was the price at which RIL agreed to sell gas to NTPC through an international competitive bidding (ICB) in 2004. The government rejected RIL-RNRL gas deal stating it was not an arms length contract and the price was not arrived through ICB. In 2007, the government approved a benchmark price for sale of gas at $4.2 per mmbtu. NTPC will lose close to Rs 20,000 crore ($5 bn) if it has to buy gas at government approved price of $4.2 per mmbtu against $2.34 per mmbtu at which it entered into contract with RIL through ICB in 2004. RIL-NTPC case in Mumbai High Court is not over pricing but over the cap on liability clause. The RNRL-RIL case will come up for hearing on July 22 and the Bombay High Court has maintained status quo in the long-drawn out legal battle till then. 

‘No fresh oil bonds, but no fuel price rise’: Deora

May 13, 2008. Petroleum and Natural Gas Minister Murli Deora indicated there will be no hike in petro products prices for now, though the finance ministry had rejected his demand to issue fresh oil bonds to counteract the losses of state oil companies due to global rising oil prices. Deora met Finance Minister P. Chidambaram to seek issue of oil bonds worth Rs.440 billion, amounting to 57.1 percent of the Rs.770 billion losses incurred by the state-run oil marketing companies during 2007-08. The central government currently issues bonds for 42.7 percent of the oil firms' losses, with another 33 percent coming from upstream oil companies.


Branded petrol, diesel price to rise

May 12, 2008. The government has asked oil companies to raise prices of branded petrol and diesel substantially and introduce non-subsidised premium cooking gas for those who can pay. Oil companies have also been advised to diversify their crude oil portfolio to save money on imports of the raw material as an immediate measure to shield themselves from rising global crude prices. The government may also consider a marginal hike in auto fuel prices after inflation calms down.  The government is closely monitoring pricing of sensitive petroleum products (petrol, diesel, PDS kerosene and domestic LPG). A price hike is difficult unless inflation is tamed. But in a scenario where crude has crossed $125/barrel mark, highly subsidised fuel supply could not be sustained for long. According to official estimates, a 10% price increase of the four sensitive petroleum products is likely to impact the wholesale price index (WPI) by 171 basis points. Public sector oil marketing companies (OMCs) have also been asked to increase prices of branded petrol and diesel.  Branded fuel market of petrol and diesel together is about 17%. It is being argued that most city consumers have ability to pay and they would not mind paying Rs 5-10 extra. Prices of branded fuels are not regulated by the government. They currently attract a premium of Rs 2-3/litre more than the normal petrol (Rs 45.52/litre in Delhi) or diesel (Rs 31.76/litre). There has been good growth of branded fuel market. HPCL’s 19.4% normal petrol sales have been converted into `Power’ (branded petrol) and 12.2% of normal diesel sales in `Turbojet’ (branded diesel). Market leader IOC (which has 17,600 outlets across the country) is selling branded petrol (Extra Premium) through 6,000 outlets and branded diesel (ExtraMile) through 10,000 pumps. Taking the government’s advice seriously, OMCs are planning to launch branded gas cylinders in the market soon. The imported cylinders made up of composite materials will be targeted at the higher end of society and will not be subsidised. Thus, the companies will be able to save a loss of about Rs 306 on each cylinder. The oil ministry has advised oil companies to explore the possibility of processing heavy crude, particularly Venezuelan crude, which is being sourced by Reliance Industries at a highly discounted rate. IOC has already saved $0.30/barrel on its crude oil imports in April-December 2007 through processing 15 new crude.   

 ‘High oil prices could slow down economic growth’: Rangarajan

May 12, 2008. Rising global crude oil prices could slow down the country’s economic growth in 2008-09 to between 8-8.5 per cent, the Chairman of the Prime Minister’s Economic Advisory Council, Dr C. Rangarajan, has said. This estimate is lower than the 8.5 per cent growth projected for 2008-09 by the Advisory Council in January this year. According to Dr Rangarajan, the country, for the time being, would still be “shielded away” from high international oil prices but this is perhaps not the best moment to make the adjustment.

‘Negotiate gas contracts by strengthening political ties’: ASSOCHAM

May 11, 2008. India's natural gas requirement is likely to swell to over 120 BCM by 2015, the year in which most of gas producing country’s will have expired their supplies contracts with Asian gas guzzlers and thus it is suggested that India further tightens its diplomatic ties with gas producing nations to ensure that adequate gas supplies are hedged for India even with higher prices, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM). The price suggested by the industry chamber for securing long term gas contracts should be within the range of US$12-14 per MMBtu, since most of Asian gas buyer have aggressively started negotiating long term gas deal with gas producing nations. Currently the spot gas price at which India is buying is on an average US$10-11 MMBtu. In a recommendatory note, to be submitted to Ministry of Petroleum and Natural Gas, ASSOCHAM has said that India’s domestic gas requirement currently stands at 35 BCM, most of which is met through indigenous production. Since in the next seven years, the requirement is going to rise by about 85 BCM, India would have to resort to larger imports of natural gas since the domestic gas production is unlikely to accelerate at substantial speed. It is estimated that India’s LNG import will rise around 70 BCM by 2015. The consumption of natural gas grew at CAGR of 7.8 per cent in the period 1997 – 2007, supported by rise in availability through domestic and imported sources of gas. Natural gas accounts for 8 per cent of current energy consumption. The domestic production is expected to grow 40 BCM in 2010 to 55 BCM by 2015, with a gap of 65 BCM to be met though imports. Resource-short countries Like Japan and Korea have traditionally relied on long term LNG contracts to meet its domestic requirements and collectively accounts for 80 Per cent of LNG import in the region. The ASSOCHAM has research found that a significant numbers of Japanese and Korean long tern LNG contracts will expire soon, about 45 per cent by 2015. Looking to secure the energy, both the countries will be aggressively try to renew expiring contrasts, even at a higher prices. According to the ASSOCHAM, even if India succeeds in hedging a gas contracts now at a recommended price of over US $ 12-14/ MMBtu, it would not loose much. It is expected that since gas discoveries have already been stuck in KG basin and other surrounding areas as also other places, even if these discovers are realized on time, India would still face about 60-65 BCM scarcity of gas, by 2015. The chamber expects domestic discoveries would give India gas availability to extend of not more then 55 BCM by 2015. In view of above, India’s dependence on natural gas import would still raise to estimated level of 60BCM, which can be secured from gas producing nations, with advance re- launch of diplomatic initiatives. This is why chamber emphasis that Indian authority should farm up and intensifies its approach in a manner so that gas producing countries release their significant gas supplies towards India.

Petroleum imports outpace exports

May 8, 2008. Rising export of petroleum products helped Commerce Ministry meet 96 per cent of the targeted $160 billion worth of exports in 2007-08, but it could not contain the country's net oil import bill. The net oil import bill in 2007-08 is likely to rise by around 41 per cent over 2006-07 as the country's refineries consumed 9 per cent more crude oil to meet surging demand even as crude oil prices rose nearly 53 per cent during the year. The net oil import bill (import of crude oil and oil products minus export of oil products) rose to around $63.52 billion in 2007-08 compared with $45.05 billion in 2006-07. The overall oil import bill rose by nearly 38 per cent to $90.02 billion compared with $65.08 billion in 2006-07. The country's crude oil import bill rose to $77.02 billion in 2007-08, 40 per cent over $54.99 billion in 2006-07. The price of crude oil rose from around $67 per barrel in April 2007 to over $103 per barrel in March 2008. India imports almost 75 per cent of its crude oil requirement. According to government estimates, imports will make up almost 85 per cent of the total crude oil demand by 2012. The value of petroleum product imports is also projected to rise around 28 per cent during the year than 2006-07. India primarily imports LPG, naphtha and diesel.



Bhel to build coal-based power plant

May 13 2008. State-run Bharat Heavy Electricals would set up Integrated Coal Gasification Combined Cycle (IGCC) power plant at Vijaywada with Andhra Pradesh Power Generation Corporation (APGenco). Bhel has signed a Memorandum of Understanding with APGenco to set up country's biggest 125 MW IGCC power plant at Vijaywada. Bhel has earmarked on several initiatives to meet the growing demands of the country's power sector.The company is confident of meeting the capacity addition targets for the Eleventh Plan period. Bhel plans to increase its power equipment manufacturing capacity from 10,000 MW to 15,000 MW per annum by 2009. 

Videocon to foray into hydropower

May 13, 2008. After foraying into thermal power sector, Videocon Industries said the group is sewing up plans to enter into hydropower. The company is in talks with the Uttarakhand government for various projects. The company is interested in the hydropower and hotel sectors, and is ready to invest in Uttarakhand. As far as hydropower is concerned, Videocon expects to produce nearly 2,000 mw in the first phase of the plan. Already, company has held talks with the top state government authorities. The company has also held talks with the Uttarakhand Power Corporation (UPCL) for selling the power. The company is identifying various sites for hydropower in Uttarakhand. Videocon recently came up with a proposal to set up a thermal power plant in the West Godavari district of Andhra Pradesh. In addition, the company is also working on gas-based power plant in Rawa, Andhra Pradesh.

PCBL sign agreement for Vietnam project

May 12, 2008. Phillips Carbon Black Ltd (PCBL) has signed a joint venture with subsidiaries of Vietnam National Chemical Corp for setting up a carbon black facility of 1,00,000 MT and co-generation of 16 MW of power in phases in Vietnam. The Vietnam plant would be operational by the first half of 2009 and would be the first carbon black plant in that country. By 2010-11 the company's capacity of carbon black would move to 5,00,000 tonne per annum from 2,70,000 tonne at present from both greenfield and brown field expansion plans. Beside, Vietnam, a greenfield project was also planned at at Mundra in Gujarat that would add 90,000 tonne per annum. Cochin was expanding its capacity by 50,000 tonne. The captive power capacity of PCBL would become 80 MW. The total cost involved for the expansion would be Rs 600 crore ($142.8 mn) and would be financed in 1:1 debt equity ratio. The equity part would be generated through internal accruals. 

Phase-2 of Simhadri power plant by 2011

May 12, 2008. According to the power generation major, NTPC, the phase two of the Simhadri thermal power plant of the NTPC, adding two more units of 500 MW each, will be completed by 2011 and the additional power will be shared among the southern States. NTPC has currently 1,000 MW being generated by the plant was being allocated exclusively for Andhra Pradesh.

NTPC had not yet been decided in what ratio the additional power (1,000 MW) should be distributed among the southern States. During 2007-08 the Simhadri power plant had generated 7,779.66 million units at a plant load factor of 88.57 per cent. During the financial year, the NTPC southern region had achieved a total generation of 30,088.940 million units and the NTPC Ramagundam in Andhra Pradesh had achieved 2,0587.668 MUs at a plant load factor of 90.14 per cent. It was the highest ever power generation at Ramagundam.

During the year, the power station at Kayamkulam had achieved generation of 1,721.546 MUs at a plant load factor of 54.51 per cent against the MoU target of 1,200 MUs. According to the company the Ramagundam station had achieved 60.82 per cent (28.75 lakh tonnes) of ash utilisation against the target of 26.86 lakh tonnes. Simhadri station had achieved 70.54 per cent (16.25 lakh tonnes) against a target of 13.54 lakh tonnes.

Tata Power to take all safety measures in Orissa plant

May 11, 2008. Optimistic about completion of land acquisition for its 1,000 MW power plant near Cuttack in five months, Tata Power’s thermal unit would adopt latest environmental safety technology. According to the company it expects the whole process of land acquisition for the Naraj Marthapur coal-based power project to be completed in 2008 by October. The company would use most advanced technologies in the Rs 5,000-crore ($1.2 bn) project to minimise plant emission. According to the company like most cities abroad as also Mumbai and Jamshedpur, proper methods for controlling air, water and noise pollution would be installed within the plant. 

1,000 MW power project in J&K soon

May 9, 2008. According to the Union Power Ministry the power starved Jammu & Kashmir would get a 1,000 MW thermal power project shortly to cater to the demand of power during the winter months when electricity generation goes very low in the state. With the operation of this project, J&K would not be facing power crisis during the winters, when water level goes very low in the snow-fed rivers, badly affecting the electricity generation. The ministry said that a memorandum of understanding (MoU) between the power ministry and the state government on construction of three more power projects over Chenab in Kishtwar district of Jammu region will be signed within the next week. The projects include 1,020-Mw Pakal-Dul, Kiru and Karwa. The Sewa-II hydel power project of 120 Mw capacity is being constructed over the Sewa river in Kathua. The project will be completed by June next year. The project is being constructed by the National Hydroelectric Power Corporation (NHPC) and will cost Rs 665 crore ($160 mn).

Toshiba, JSW to set up JV for power equipment

May 8, 2008. Japanese electronics and electrical maker Toshiba Corporation has teamed up with the OP Jindal-promoted JSW Group to establish a joint venture company in India to manufacture and market steam turbines and generators for thermal power plants. The Toshiba-JSW venture requires an area of about 4 lakh sq m to set up facilities and will jointly invest about $250 mn (about Rs 1,025 crore) in the plant.

The joint venture, to be established by June 2008, will manufacture and market medium-to-large steam turbines and generators ranging from 500 mw to 1,000 mw. The venture will have an initial capitalisation of $50 mn (Rs 210 crore). Toshiba will hold a stake of 75 per cent, JSW Energy will own 20 per cent and group company JSW Steel hold the remaining share. The operations are expected to begin in September 2009.

As per JSW Energy the alliance is aimed at giving us an advantage in the domestic energy sector and capitalising on the growing electricity demand. The company was talking to multiple Indian companies for foraying into the power generation equipment manufacturing space in India. Toshiba India is targeting revenues of more than Rs 4,000 crore ($1 bn) from India by 2015, of which a significant component would come from the power and industrial sectors.

Bhel to invest $240 mn in Tiruchi plant

May 8, 2008. State-run power equipment-maker Bharat Heavy Electricals Ltd (Bhel) would invest Rs 1,000 crore ($239.5 mn) in its Tiruchi plant in the current fiscal to increase boiler capacity from 5,750 MW to 10,000 MW by June-July '09. The current order book of Tiruchi plant stands at Rs 7,200 crore ($1.7 bn), and the company is of the view that it would take this figure to Rs 17,000 crore ($4 bn) in three years time. Bhel also plans to form joint venture with Tamil Nadu Electricity Board (TNEB) to build boilers, in which it would have 26 per cent stake.

The company has signed a Memorandum of Understanding with TNEB to form joint venture. The company is contemplating more joint ventures with other state electricity boards. The company has already designed 800 MW boiler, but the order for the same are yet to be placed. Bhel and country's largest power producer NTPC Ltd formed 50:50 joint venture on April 29 last month to carry out engineering construction procurement contracts for power plants and infrastructure projects manufacture and supply equipments in India and abroad.

Transmission / Distribution / Trade

Jyoti bags $7 mn order from Aravali Power

May 13, 2008. Jyoti has received a turnkey order from Aravali Power Co, for design, engineering, supply, erection, testing and commissioning of cooling water system and make up water system for Indira Gandhi super thermal power plant - Jhajjar (3x500 MW). Aravali Power is a joint venture between NTPC, HPGCL and IPGCL. Jyoti has associated itself with Hyosung Ebara Co, Korea for design of cooling water pumps. The value of this order is Rs 27.24 crore ($6.5 mn) and will be completed within 30 months. 

Power situation improves in TN

May 13, 2008. According to the Tamil Nadu ministry for power, the government would soon lift restrictions on power usage clamped on the industries as the power supply situation has improved in the state. The ministry said that the state would need Rs 2,000 crore ($475.3 mn) in excess to install additional transformers and feeders. The power situation had improved in the state since wind mills had started generating the energy from April 27 this year against the routine availability commencing in the second fortnight of May every year. The recent generation was to the tune of 1,000 Mw to 1,500 Mw and therefore the state was not to purchase power from the neighboring states.

KEC International bags $27 mn PGCIL order

May 13, 2008. KEC International has bagged a contract valued at Rs 111.41 crore ($26.5 mn) from Power Grid Corporation of India for supply and construction of 400 1KV transmission lines on turnkey basis. These contracts are for supply of towers, line materials, erection and commissioning of transmission lines 400 KV DC QUAD Biharsariff- Koderama, 400 KV Maithon RB to Maithon and LILO of 400 KV Jamsedpur at Majia. The lines are to be constructed in the state of Jharkhand, Bihar & West Bengal, The total length of the lines is 160 Kms. KEC International is a global leader in the power transmission EPC sector and part of the $3 bn RPG Group. The company has established a reputation in 40 countries and currently operates in 16 countries across South and Central Asia, the Middle East, Africa and North America. 

JSPL stops power supply to industrial park

May 10, 2008. The fate of as many as 32 industrial units in the OP Jindal Industrial Park hangs in the balance after Jindal Steel and Power Ltd (JSPL) today stopped power supply following the decision of the Appellate Tribunal for Electricity to cancel the distribution licence granted to the company. The tribunal's decision came as a big setback for JSPL, which was planning to develop the industrial park as a model. The firm is also taking up a major expansion plan to step up its steel capacity to 5 million tonne per annum by 2011. The Chhattisgarh State Electricity Regulatory Commission (CSERC) had granted distribution licence to JSPL on November 29, 2005, for supplying power to the industrial park spread over 750 acres. The company was supplying power from its captive power plant at the rate of Rs 2.50 per unit.

According to company, the park was set up after the company sealed a pact with the Chhattisgarh government on October 23, 2002. The state government granted permission for supplying power to the industrial units on January 29, 2003, while the state-run Chhattisgarh State Electricity Board (CSEB) gave permission for construction of transmission line for supply of power to the industrial park on May 31, 2003. All these permissions were granted before the Electricity Act, 2003, came into effect in the state. The company applied to the CSERC for the distribution licence according to the provisions of the Electricity Act, 2003.

CSEB, however, vehemently opposed, despite having earlier given permission for laying transmission line for supplying power to the industrial park. CSERC finally granted distribution licence to the JSPL. CSEB filed an appeal before the Appellate Tribunal for Electricity. The Tribunal pronounced judgment in JSPL's favour on May 11, 2006. CSEB later moved to the apex court to challenge the tribunal's verdict. The Supreme Court referred the matter back to the Tribunal, which, on May 7, 2008, cancelled the distribution licence granted to the company.

Tata Power eyes shipping biz

May 7, 2008. Tata Power plans to foray into shipping. The company will invest $500 mn through its Singapore-based special purpose vehicle, TPC Energy Asia, to prepare a fleet of nine vessels to transport coal from Indonesia to its plants located in the western coast of India. The company has already signed charter agreements for three ships., The company would buy ships worth up to $100 million each. Reliance Power, which is developing two ultra mega power projects, is reportedly considering a foray into the shipping business to cut the transport cost. Analysts said the India-bound freight rates are expected to be firm as companies such as Vedanta, Reliance Power and other ultra mega power projects begin shipment of coal. It is not just the prospect of high rates that is weighing on the minds of power producers, but also the possibility that ships too may not be available. Tata Power may consider commercial use of spare ship capacity later. Analysts believe Tata Power may use its shipping fleet to provide services to its arm importing coal or ore and exporting finished goods. The Tata Group's power utility, which will continue to focus on core areas, wants to restructure its arms and make them self-sustained and profit-making entities. The company also plans to strengthen its power transmission and distribution operations. Tata Power holds managing control in the distribution company, North Delhi Power, that supplies electricity to north and north-west Delhi. The company also has a joint venture with Power Grid Corporation, called Powerlinks Transmission, for electricity transmission. Tata Power is also seeking coal and transport linkages to get a firm grip on costs by acquiring strategic stake in foreign coal mines. The company intends to raise its electricity generation capacity to 12,861 mw by 2012-13 (April-March) from 2,474 mw at the end of the current financial year.

Most of the new capacity being added by the country's largest private sector electricity generator will be fuelled by imported coal, largely from Indonesia. The company's annual requirement of imported coal is seen rising to 25 mn tonnes by 2012 from 1.8 million tonnes now, which will significantly drive up the cost of coal and freight charges. Fuel cost, which includes that of coal, oil and gas and transport, is the single largest cost component for Tata Power, accounting for 60-70 per cent of the company's total expenditure. Tata Power has picked up 30 per cent stake each in two coal mines in Indonesia. One of these mines will supply about 10 millon tonnes annually to Tata Power, which will take care of 50 per cent of its coal requirements by 2012.

Tata Power's main business is electricity generation and bulk supply for the Mumbai metropolitan area, which is regulated by the Maharashtra Electricity Regulatory Commission. The company is setting up a 4,000 mw ultra mega power project at Mundra in Gujarat, which is likely to be completed almost two years ahead of schedule in 2012. Subject to availability of coal, the company may scale up the capacity of its other upcoming big project, a 1,050 mw power plant at Maithon in Jharkhand. Maithon Power, a 74:26 joint venture between Tata Power and Damodar Valley Corporation, is setting up two units of 525 mw capacity each at Maithon in Jharkhand and this would be operational in two stages by 2011.

Haldia Petro buys out L&T in power JV

May 7, 2008. Haldia Petrochemicals Ltd (HPL) had acquired Larsen & Toubro's 51 per cent stake in Rs 133 crore ($32.2 mn) HPL Cogeneration Ltd (HPLCL), the joint venture for captive power supply to HPL, for an estimated Rs 180 crore ($43.5 mn). The buy-out came at a time when the company was operating in adverse circumstances, with the bottomline under great pressure. The 10-year joint venture produced 116MW for HPL's operations. HPL planned to invest in HPLCL to improve the energy efficiency of the plant by utilising alternative feedstock that matched its expansion plans. It could use mixed gases in place of naphtha for power generation. The company currently used 70MW power from HPLCL. Its energy requirements were estimated to rise post its 30 per cent capacity expansion project that is likely to be commissioned by end of 2008. The total installed capacity will be 1.7 million tonnes per annum after expansion.

Policy / Performance

Power sector raises $2 bn in foreign aid

May 13, 2008. The Indian power sector tied up external assistance of Rs85bn (over $2.1 bn) from multilateral bilateral agencies such as World Bank, Asian Development Bank, Japan Bank of International Co-operation and KfW (Germany) in the year 2007-08 despite a very limited basket and stiff competition from projects in other sectors as well as from other developing countries. Agreements in respect of nine power projects spanning across power generation, transmission and distribution were signed. Thus, a record growth of 175% over the previous year has been achieved, demonstrating conclusively a perceptible change in the risk perception of these agencies in respect of the Indian power sector. In the year 2006-07, agreements for four power projects with aggregate external assistance of Rs31bn (US$775mn) were signed. The projects sanctioned during 2007-08 were: Rampur HEP/SJVNL(WB), PSDP-IV/PGCIL(WB), Power Sector Transmission-IV/PGCIL(ADB), M.P. Power investment-I/MPPTCL(ADB), M.P. Power investment-II/East DISCOM(ADB), M.P. Power investment-III/MPPTCL(ADB), M.P. Power investment-IV/E,W,C DISCOM(ADB), Maharashtra Transmission system (JBIC), EHV Transmission system in Haryana/REC(JBIC). On its part, the Government boosted absorption of developmental external assistance in power sector. During 2007-08, the utilization of external assistance in 23 power projects in central and state sectors was Rs28.30bn which is about 18% higher than the utilization of Rs24.08bn in these projects during 2006-07. Engagement of Multilateral/Bilateral agencies in Indian power sector has, thus, increased manifold in the recent past. These agencies are instrumental in providing long term developmental financial assistance to specific projects in central and state sectors on highly competitive terms & conditions.

Himachal hydel power PSU gets mini ratna status

May 13, 2008. 'SJVNL has been conferred the prestigious status of mini ratna category 1 within only four years of coming into operation. The 'mini ratna' status grants enhanced autonomy and delegation of financial powers to profit making companies to make them more efficient and competitive. SJVNL has built and now runs the country's largest hydel project - the 1,500 MW Nathpa Jhakri project. During the last fiscal year the project generated a record 6,432 million units of energy. This energy is supplied to the power hungry northern grid. The company is currently in the process of building the 412 MW Rampur project at a cost of Rs.20.47 billion. This project also falls in the Sutlej river basin. The company has an ambitious plan of additional power generation of 3,000 MW in the 11th and 12th five year plan periods. SJVNL is jointly owned by Himachal Pradesh and the central government.

NTPC eyeing stakes in Indonesia coal mines

May 12, 2008. NTPC Ltd, India's leading power producer, is looking to buy majority stakes in one to two Indonesian coal mines. For this purpose the company already appointed three merchant bankers and its endeavour is to finalise the stake purchase by the end of this financial year.

REC, Damodar Valley in talks for coal mines abroad

May 8, 2008. Rural Electrification Corporation (REC) and Damodar Valley Corporation may come together to form a joint venture for buying coal mines abroad. REC has got a proposal from DVC for a joint venture to buy coal mines abroad. It is at a very preliminary stage. REC has already signed MoU with IDFC and they will invest Rs 150 crore ($36 mn) each in the joint venture that will take up consultancy and funding of power distribution projects.  

'Govt investing heavily in uranium exploration': DAE

May 11, 2008. According to the Department of Atomic Energy (DAE) to ensure that the country's nuclear programme is not dependent on the implementation of the Indo- US civil nuclear deal, the government is investing heavily in uranium exploration. Rajasthan, Andhra Pradesh, Karnataka, Meghalaya and other regions are among those DAE is looking at for uranium exploration. Approximately Rs 700 crore ($168.3 mn) is being invested in using the latest technology to explore multiple states for uranium. The DAE is of the view that as it is making massive investment in uranium exploration and if it hits a huge find then the problem is over. According to the DAE currently the country has four uranium mines, all of which are located in Jharkhand. However, nuclear power plants in the country have been reportedly functioning at half the capacity due to lack of uranium, a radioactive metallic chemical element used as a fuel in nuclear reactors. Uranium plays a crucial role in India's three-stage nuclear programme, which in the future, is expected to be dependent on the radioactive element thorium that is found in large quantity in the country. Uranium Corporation of India Ltd (UCIL) has proposed the setting up of mining and milling plants in two districts in Andhra Pradesh. Further investments are also expected to be made in uranium processing in Jharkhand. The UCIL has faced some oppositon for their proposed mine in Meghalaya, but it is working to resolve the issue. 

GMDC looks for coal mine partners in Africa

May 11, 2008. After the Adani Group’s foray into Indonesia and Gujarat NRE’s into Australia for coal, the state-owned Gujarat Mineral Development Corporation (GMDC), now diversifying into power generation projects in joint ventures in Gujarat and other States, plans to acquire coal mines in Africa to make the commodity available to power generating companies in India. The corporation is looking for alliance on a partnership basis in South Africa, Botswana and other coal-rich countries of the Continent. In view of the prevailing socio-political situation in the African countries, any outside company normally picks up a locally influential partner close to the Government.  The corporation would also like to have a private partner and acquire mining rights and then plan to market this coal to India, primarily to power generation plants. GMDC is also trying to forge tie-ups with its counterparts and private parties in Puducherry, Kerala, Delhi and Maharashtra in acquiring coal blocks for joint development and setting up power generation plants. GMDC, through its proposed joint ventures, plans to invest Rs 20,000 crore ($4.8 bn) in setting up three power projects in two coal-rich States — Chhattisgarh and Orissa — to generate a total of 4,500 MW of electricity, of which 2,750 MW would be available to Gujarat by 2012. Of these, two plants would be in Chhattisgarh to generate 2,750 MW, providing 1,700 MW of power to Gujarat. Similarly, one plant would be in Orissa to generate 1,750 MW and provide 1,050 MW to Gujarat. This would help Gujarat tide over the deficit of 2,500 MW at current levels. The Union Ministry of Coal had allotted the Morga-II coal block in Chhattisgarh to GMDC. It has also planned a joint venture with Jaypee Associates to set up a cement plant in Kutch (24 lakh tonnes annual capacity) which, together with GMDC, would have equity with Gokul Group to set up a captive power plant (125 MW) in Surat district. To facilitate these plans, GMDC would need huge quantities of coal on a long-term supply basis for which it is not only reaching out to other States but also looking to acquire coal mines abroad. Interestingly, within Gujarat, GMDC has virtually ended the dependence of local industry on coal-fuel from other States, offering them lignite as a more cost-effective fuel substitute. It mines nearly nine million tonnes of lignite annually from its mines in Kutch, Bharuch and Bhavnagar districts of the State.

Govt Okays $2 bn FDI in Essar Power

May 10, 2008. The government has approved Essar Power’s proposal to infuse up to Rs 8,000 crore ($1.9 bn) as foreign equity in the company for undertaking various downstream projects, including power and coal mining. The proposal has already been cleared by the Foreign Investment Promotion Board (FIPB). Since the investment inflows have exceeded Rs 600 crore ($144.2 mn), the proposal needed to be cleared by the Cabinet Committee on Economic Affairs (CCEA). The FDI would be in the form of equity from Essar Power Holdings (EPHL), a foreign entity which is part of the Essar Group and is incorporated in Mauritius. Essar Global (EGL), a company incorporated in Cayman Islands is the holding company of EPHL and also holds diverse investments in India and other countries. At present, EPHL is the operating company of the Essar Group in the power sector. It owns and operates a 515 mw power plant at Hazira in Gujarat. The approval will be subject to the condition that the private Indian companies setting up or operating power projects as well as coal or lignite mines for captive consumption in such projects will be allowed foreign equity up to 100% provided that coal or lignite produced by them is meant entirely for captive consumption in power generation.

Govt to usher in power reforms

May 9, 2008. The government is soon going to introduce the revised Accelerated Power Development and Reforms Programme (APDRP Phase II). The new Rs 50,000-crore ($12 bn) APDRP scheme plans to bring the Aggregate Technical and Commercial (AT&C) losses to less than 15 per cent by the end of 11th Five Year Plan in the urban and high population density areas. According to the ministry it should reduce the distribution losses to 10 per cent. According to the Power Ministry, overall AT&C losses are around 35 per cent against about 39 per cent in 2001-02. The government had approved APDRP in March 2003 to accelerate distribution sector reforms. Besides reducing AT&C losses, the scheme seeks to bring commercial viability in the power sector and reduce outages and interruptions. Under the scheme, the government provides 50 per cent central assistance for strengthening and upgrading sub-transmission and distribution network. Finance Ministry has earmarked an annual budgetary support of Rs 800 crore ($192.6 mn) under the APDRP scheme in the Union Budget 2008-09.

Govt may relax rules for power plants in SEZs

May 8 2008. The government is considering relaxing or diluting rules that prevent power plants in special economic zones, or SEZs, from selling power outside such zones without paying significant extra taxes and levies, in an attempt to meet growing demand for power in a rapidly expanding economy. The move will likely benefit customers, but will put power plants outside such zones at a disadvantage. That is because units, including power plants, located in SEZs are eligible for a range of fiscal incentives that lower their production and operating costs. This means power plants located in SEZs can sell power at a lower price than those located elsewhere. Existing rules take this factor into account and say that power generated within an SEZ “may be transferred to domestic tariff area on payment of duty on consumables and raw materials used for generation of power”. The rules add that these units will also have to pay extra taxes, including basic customs duties, countervailing duties (to offset against the domestic excise and sales tax levies) and a special additional duty (4%) to make up for the fiscal incentives. It is these rules that the government now wants to relax or dilute. Discussions are on among the ministries of commerce, power and finance on firming up the regulations under which power plants located at these zones should function. Once the basic issues are sorted out, a proposal may be sent to the Union cabinet for clearance. These SEZs would help utilities (power generation firms) cut down their costs and, thereby, bring down power tariffs in the country. As per the proposal, these power units should be allowed to supply power to the domestic tariff area where the SEZ is based by paying reduced duties. The idea is to frame a comprehensive policy for setting up SEZs specifically for the power sector. The power generated within these SEZs will be treated as merchant power.

Centre ups e-sale quota of coal by 5 times

May 8, 2008. The Union ministry of coal has directed all the state governments to indicate the exact requirement of coal by the small and medium scale industries in the respective states, so that new coal distribution centers can be set up to help the SMEs. According to Union ministry for coal it is ready to set up as many distribution centers closer to the user groups as per the recommendation of the state governments. However, till now none of the states have come forward with their requirement of coal. The ministry has recently increased the coal allotment quota under e-sale system by five times from the present 3 million tonne per month to 15 mt per month. From now on, SMEs will be supplied coal at a rate on par with big industries.




Dana makes oil discovery at East Rinnes

May 12, 2008. Dana Petroleum announced the discovery of the East Rinnes Oil Field in Block 210/24a in the UK Northern North Sea. The Company reported finding the West Rinnes oil accumulation, just 5 kilometers from the Dana operated Hudson producing oil field and 2.5 kilometers from the Company's Melville oil field. East Rinnes therefore becomes the fourth oil field now under Dana's operatorship in this prolific area of the Northern North Sea. The East Rinnes discovery well, 210/24a-11z, was drilled with Sedco 704 to a total measured depth of 6,935 feet (6,144 feet true vertical depth subsea) and encountered a full Brent reservoir sequence. A comprehensive set of electric wireline logs has been acquired including pressure data and oil samples. Initial analysis indicates that the East Rinnes oil is similar to the high quality crude discovered at West Rinnes and to that being produced by Dana at the nearby Hudson oil field. Given the similarity in reservoir quality and oil characteristics to West Rinnes, which flowed at an equipment restricted rate of 7,800 barrels per day, the East Rinnes well is not being drill stem tested as the Company has already gathered sufficient data to fully evaluate the discovery.

Oil search signs Kurdistan PSC

May 12, 2008. Oil Search Limited has signed a Production Sharing Contract (PSC) for the 632 square kilometer Shakal Block with the Kurdistan Regional Government (KRG) in Iraq. The Shakal Block lies in the southeastern fairway of the prolific Zagros Fold belt of Kurdistan and lies immediately south east and on trend with the Pulkhana Field, which has reported proven reserves of around 300 million barrels of oil. Surface geology, digital terrain models and topography indicate that the Pulkhana structure could extend into the Shakal block. Oil Search estimates that the block has the potential to contain mean unrisked recoverable reserves of some 250 million barrels, either in a separate structure or as a continuation of the Pulkhana field. The Shakal PSC fully conforms to the Model PSC required under new Iraqi oil and gas laws and has a seven year exploration period and a 20 year extendable production period. According to the Oil Search Kurdistan is one of the few places left in the world where independent oil companies can capture material exploration positions with large reserve potential and on satisfactory commercial terms. The region is lightly explored and contains some of the most prospective geology in the world, with relatively low sub-surface risk. Although Iraq is clearly a high-risk area, the Kurdistan region is regarded as relatively stable from a business and security risk perspective with increasing foreign investment occurring as a consequence.

OPEC Output Down for April

May 9, 2008. The 13 members of the Organization of Petroleum Exporting Countries (OPEC) pumped an average 31.87 million barrels per day (b/d) of crude oil in April, a 350,000 b/d decrease from March, according to a Platts survey of OPEC. The sharp drop was largely the result of steep output losses in Nigeria. Excluding Iraq, the 12 members which participate in output agreements pumped an average 29.49 million b/d, 360,000 b/d down from an estimated 29.85 million b/d in March. Other smaller decreases came from Angola, Iran, Qatar, Saudi Arabia and Venezuela. Iraqi volumes were a shade higher at 2.38 million b/d, with a slight dip in exports offset by slightly higher internal supply. Libyan output also edged up, to 1.75 million b/d from 1.74 million b/d in March. The latest estimates show the OPEC-12 missing their 29.673 million b/d output target by 183,000 b/d.

  Shell to Start Output at Brazil BC-10 Oil Block in ’09

May 8, 2008. Royal Dutch Shell PLC (RDSA) next year will start producing from heavy oil fields in the BC-10 block in Brazil's Campos Basin. The company will install its Espirito Santo platform that is slated to pump from the Ostra, Abalone and Argonauta fields in the block and has an output capacity of 100,000 barrels a day. Shell has a 50% operating stake in the BC-10 block off Espirito Santo state, while Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, holds another 35%, and India's state-run Oil & Natural Gas Corp. has 15%. In a second phase of the project, Shell will also start producing from the Nautilus field in the same oil block. Shell has previously said it estimates potential oil reserves in the BC-10 block of 400 million barrels. Shell is also preparing to produce from the extra heavy Atlanta and Oliva fields in the BM-S-4 block in the Santos Basin further south off Brazil's coast, but hasn't given a date for production start there yet. Shell is the lead operator of the block with a 40% stake. Petrobras holds 40% and Chevron Corp. (CVX) the remaining 20%. Shell currently already produces little more than 30,000 barrels a day from the twin Bijupira and Salema oil fields in the Campos Basin. The company also has a 40% non-operating stake in the BM-S-8 block in Brazil's ultradeep pre-salt play in the Santos Basin, where the Bem-Te-Vi find was made recently. The BM-S-8 block is adjacent to the BM-S-9 block where Petrobras has made its promising Carioca find.

StatoilHydro makes gas discovery on Alve

May 8, 2008. StatoilHydro has confirmed the existence of gas and condensate on the Alve field in the Norwegian Sea around 16 km southeast of the Norne field. Based on a preliminary estimate, the discovery includes three to five billion cubic meters of gas. A thin oil zone was also proven below the gas. Extension drilling was carried out in this production well. Due to come on stream in January 2009, it is the first production well on the Alve field. The purpose of the exploration extension was to prove hydrocarbons in a reservoir located deeper in mid-Jurassic rocks than the resources proven in previous exploration wells on the Alve field. Gas and condensate in sandstone of mid-Jurassic rock were proven during the extension drilling.

Devon's increased production in Q1 ups sales 52 pc

May 7, 2008. Devon Energy reported that combined oil, gas and natural gas liquids production from continuing operations averaged 640 thousand oil-equivalent barrels (Boe) per day in the first quarter of 2008. This was a nine percent increase in production from continuing operations compared with the first quarter of 2007. The production growth was concentrated in onshore fields within the United States and Canada. Devon has increased oil and natural gas production from retained properties for eight consecutive quarters. Sales of oil, gas and natural gas liquids increased 52 percent to $3.2 billion in the first quarter of 2008. The combined effects of increased oil and gas production and higher oil, gas and natural gas liquids prices led to the increase in sales. Devon drilled 646 wells in the first quarter of 2008, with an overall success rate of 97 percent.


Vietnam breaks ground on $6 bn refinery

May 12, 2008. Vietnam started building its second oil refinery, a $6.2 bn complex, in a bid to feed the nation's booming economy. Vietnam Oil and Gas Corporation (PetroVietnam), the oil monopoly in the communist nation, set up a joint venture with its counterparts from Japan and Kuwait to build Nghi Son refinery in the north of the country. Vietnamese hailed the project at the ground-breaking ceremony, as it was the country's most important and biggest power scheme, attracting capital investment of $6.2 billion. The refinery with a targeted capacity of up to 10 million tonnes a year, is located in Thanh Hoa province, about 200 kilometers (125 miles) south of the capital Hanoi. Petrovietnam will hold a 25.1 percent stake, Japan's Idemitsu Kosan Co (IKC) and Kuwait Petroleum International (KPI) will each hold a 35.1 percent share, and Mitsui Chemicals Inc (MCI), also of Japan, will have the remaining 4.7 percent. The Nghi Son refinery, to be operational by 2013, will turn Kuwaiti oil into petrol, liquefied petroleum gas, diesel, kerosene and jet fuel for Vietnam, which has offshore oil reserves but currently imports petroleum products. The facility would create about 10,000 jobs. Dung Quat, the country's first refinery costing around $2.5 billion, is now being built after lengthy delays in central Vietnam and is expected to produce 6.5 million tonnes a year from 2009 -- equivalent to a third of the country's needs. By 2013, this project combined with Dung Quat refinery would ensure 65 percent of Vietnam oil and gas demand and thus will contribute to ensure the nation's energy security. PetroVietnam is now preparing for its third refinery project in Long Son district of southern Ba Ria-Vung Tau province. Vietnam's economy grew at 8.5 percent a year in 2007, and its energy needs for industry, households and transport are rising annually at about twice that rate. Last year, Vietnam spent $8 billion to import 12.55 million tonnes of refined oil.

Korean, Japanese firms win contracts for Kuwaiti refinery

May 12, 2008. Four South Korean and a Japanese firm were declared winners of four major contracts worth billions of dollars to build a new refinery in Kuwait. The total value of the bids made by the companies was around $8.3 billion. One contract for the main manufacturing units was awarded to a consortium of Japanese JGC Corp and South Korea's GS Engineering and Construction Corp for $4 bn. SK Engineering and Construction Co of Korea was awarded the subsidiary units for $2.06 billion, while Daelem Industries, another South Korean firm, won a contract of tanks for $1.184 billion. Korea's Hyundai Engineering and Construction Co was awarded a contract for offshore facilities at $1.12 billion. A separate contract for consultancy, which was not part of the tender, had been earlier awarded to US Fluor Engineering firm and it was reported to be for $2 billion. Kuwait has earmarked 4 billion dinars to build the 615,000 barrels per day (bpd) refinery to be constructed in the southern Al-Zour area, close to the border with Saudi Arabia. The first round of bids was scrapped in September because bids came in at more than $15 billion, way above the initial budget of $6.3 billion. State-owned Kuwait National Petroleum Company (KNPC) subsequently earmarked $15 billion for the project. The new contracts will be based on a cost plus profit margin, which means Kuwait paying the cost of the project plus an agreed profit which has not been disclosed, making the total cost higher than the $8.3 billion announced. Construction is due to start later this year or early in 2009, with the refinery to come onstream in May 2012. Completion was originally planned for 2010. KNPC is also planning a multi-billion-dollar project to modernize two of its three refineries at Al-Ahmadi and Mina Abdullah, which currently have a combined capacity of just over 700,000 bpd. The third refinery will eventually be retired. The new refinery and the upgrade project are slated to boost Kuwait's refining capacity from the current 936,000 bpd to 1.4 million bpd by 2012. Kuwait, which sits on about 10 percent of global crude reserves, currently produces around 2.55 million bpd.

Venezuela to own 49 pc of Petroecuador refinery

May 12, 2008. Petroleos de Venezuela, or PdVSA, will have 49% of the shares in the Refineria del Pacifico-CEM, a company that will be established with Petroecuador to build a new refinery for heavy crude. Petroecuador will hold 51% of the company's shares. The refinery would process around 300,000 barrels of heavy crude a day and could require at least a $4 bn investment. Refineria del Pacifico will choose a construction company for the new refinery. The construction company chosen will be expected to finance 70% of the refinery's cost and the remaining 30% will be financed by PdVSA and Petroecuador. The new refinery project is important for Ecuador, which has to import processed petroleum products such as gasoline because of a lack of refining capacity. Many of the new oil discoveries in Ecuador are heavy crude and cannot be processed at the country's three existing light-crude refineries. The new refinery, which will be built in the coastal province of Manabi, is part of a strategy to integrate Latin American companies that began in February 2007, with an agreement to swap Ecuadorian oil for Venezuelan diesel and naphtha.

CNPC aims to account for 40 pc of China's oil refinery market

May 8, 2008. China National Petroleum Corp. (CNPC) intends to build six ten-million-ton oil refinery bases by 2010. With a processing capacity of 160 million tons annually, these bases would account for 40% of the nation's total oil refining capacity. The oil producer also projected to build up 18 ten-million-ton oil refinery bases by 2020, which would have a yearly production capacity of 300 million tons (including 150 million tons for sour crude oil), amounting to 45% of the nation's total. Unlike China Petrochemical Corp., which is more sensitive to the fluctuating prices of crude oil in the global market, CNPC can support 83% of crude oil by itself. Up till now, CNPC has the nation's biggest refinery that has a production capacity of 20.5 million tons in Dalian, coastal city in Liaoning Province.

Transportation / Trade

Abu Dhabi to invest $25 bn in gas processing & pipelines

May 12, 2008. State-controlled Abu Dhabi Gas Industries (Gasco) is investing about $25 billion in gas-processing plants and pipelines as it develops more fields to meet surging demand. Two major gas-processing plants and around 10 new onshore gas pipelines covering a total of 1,500 kilometres are being built in and around Abu Dhabi over five to six years. Gasco is 68 per cent owned by Abu Dhabi National Oil Co (Adnoc), 15 per cent by each of Royal Dutch Shell and Total, and 2 per cent by Partex. Gasco can process as much as 5.3 billion cubic feet per day of natural gas, though it is only operating at two-thirds capacity. The two planned gas-processing plants will be built at Habshan and Maqta. New gas fields, like the Shah, with huge sour gas reserves, are being developed and additional gas-processing will be undertaken by Gasco. Gasco operates 2,500 kilometres of pipelines, moving gas and related products such as crude oil, condensates, natural gas liquids and water.

Peru leans toward Mountain gas pipeline route

May 12, 2008. High-level government officials are signaling that Peru will select a proposal to place a natural gas pipeline through the Andes Mountains. That plan, proposed by Kuntur Transportadora de Gas SAC, is in competition with a proposal made by a unit of Suez that would run a pipeline down the Pacific coast. The two companies have lobbied in support of their plans, but experts say demand for the gas so far is limited and barely enough for one pipeline to southern Peru. Government officials also say they are bound to respect a law that has declared a pipeline through the populated regions of the Andes to be in the national interest.

Magellan plans SE Texas products pipeline

May 12, 2008. Magellan Midstream Partners, L.P. (MMP) plans to invest $240 mn to build energy infrastructure in Texas, providing the partnership a direct pipeline connection to the refinery hub of Port Arthur. Magellan plans to construct an 80-mile, 16-inch diameter refined petroleum products pipeline to connect the refining region of Port Arthur, Texas to the partnership's existing terminal at East Houston, which serves as an origin point for Magellan's 8,500-mile pipeline system. The new pipeline, which will be capable of transporting 150,000 barrels per day, is supported by a 15-year agreement with Motiva Enterprises LLC. Based on current project plans, the pipeline system is expected to be fully operational by 2011, consistent with the completion of Motiva's Port Arthur refinery expansion. The pipeline system also will allow Magellan to provide transportation services for other refiners in the Port Arthur area. In addition, a pipeline connection will be added between the partnership's East Houston terminal and Motiva's existing Pasadena terminal. Currently, Magellan's pipeline system delivers product to three Motiva terminals in the Texas market, including Hearne, Waco and Dallas. Magellan also intends to invest in infrastructure at its existing asset locations to increase the partnership's capabilities to handle additional transportation volumes, including construction of 1.2 million barrels of storage and three additional truck rack lanes at its East Houston terminal and 200,000 barrels of storage at its Frost, Texas facility. These enhancements are expected to be fully operational by 2010. Further, the partnership is adding ethanol blending capabilities and a third truck rack lane at its West Fort Worth terminal by third quarter 2008 and intends to expand loading capabilities at its Odessa terminal with the addition of two truck rack lanes by early 2009. Including $270 mn of expansion projects already underway and these new Texas pipeline and terminal investments, management's expansion capital spending estimate for 2008 is now approximately $300 million, with an additional $140 million of spending needed in 2009 and $70 million in 2010 to complete these projects. These expansion capital estimates exclude potential acquisitions or spending on more than $500 million of other potential growth projects in earlier stages of development.

North West shelf LNG confirms sales agreement with Osaka Gas

May 9, 2008. The North West Shelf LNG Venture sellers confirm that following the signing of a binding Heads of Agreement a Sales and Purchase Agreement (SPA) has now been executed with Japan's second largest gas utility Osaka Gas for the supply of around 0.5 million tonnes of LNG a year starting in April 2009, for six years on an ex-ship basis. This agreement increases the North West Shelf LNG Venture sales to Osaka Gas to around 1.5 million tonnes a year after 2009. The six equal participants in the North West Shelf LNG Venture are: BHP Billiton Petroleum (North West Shelf) Pty Ltd; BP Developments Australia Pty Ltd; Chevron Australia Pty Ltd; Japan Australia LNG (MIMI) Pty Ltd; Shell Development (Australia) Proprietary Limited; and Woodside Energy Ltd (Operator). CNOOC NWS Private Limited is also a member of the North West Shelf Venture but does not have an interest in North West Shelf Venture infrastructure.

Petrobras' Gasene pipeline project enters final stretch

May 9, 2008. State-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, expects the construction of a gas pipeline linking Brazil's southeast to its northeast to be completed in early 2010. Brazil officially inaugurated the construction of the last and biggest stretch of the 1,387-kilometers-long pipeline called Gasene. The 954-kilometer stretch from Cacimbas in Espirito Santo State to Catu near Bahia state capital Salvador will make it possible to transport gas from fields in Brazil's southeast to its northeast. Brazil's northeast recently had faced energy supply bottlenecks due to a drought that hampered hydro-electric power generation. Petrobras is already operating the first two parts of Gasene that run from Cacimbas to Espirito Santo state capital Vitoria, and then farther south to Cabiunas in Rio de Janeiro state. The company has been transporting up to 7.7 million cubic meters of gas a day from fields in Espirito Santo to Rio de Janeiro and states farther south since February, which has relieved the country's energy supplies. The increasing volumes of domestic gas production will make Brazil less dependent on gas from neighboring Bolivia in coming years.

Fresno County panel backs pipeline for heavy crude

May 9, 2008. The dry Diablo Range in southwest Fresno County may soon be home to a new crude oil pipeline transporting hundreds of thousands of gallons per day to a San Francisco Bay Area refinery. Chevron won approval from the Fresno County Planning Commission to build a 57-mile pipeline for hot, heavy crude oil from San Ardo in the Salinas Valley to an existing pipeline near Coalinga. There was no public opposition to the project, which was approved by a unanimous vote of the six commissioners present. Oil from the San Ardo field is currently sent to the refinery by truck, but upon completion in 2010 or 2011, the 10.75-inch pipeline will save an estimated 200 truck trips per day and thus will take trucks off the road, which will reduce transportation and air quality impacts. The buried, insulated pipeline will be designed to transport 4,000 to 32,000 barrels per day. The pipeline will end near Jayne and Lassen avenues, just east of Interstate 5.

Policy / Performance

Serbian cabinet agrees to sell refinery to Gazprom

May 12, 2008. Serbian cabinet ministers approved an oil and gas deal with Russia involving the sale of the country's biggest refinery to Gazprom unit Gazpromneft. The agreement must be approved by the new parliament formed after the early parliamentary elections on May 11. The deal involves Gazpromneft acquiring 51 percent in Naftna Industrija Srbije, or NIS (Petroleum Industry of Serbia). The agreement was signed in Moscow on Jan 25. The agreements allow Serbia to join the South Stream gas pipeline project. The Serbian section of the future gas pipeline will enable Russia to transit and supply its gas to the Balkans and other European countries through the Black Sea, Bulgaria and Serbia. An underground gas storage facility with an active capacity of at least 300 million cubic meters is planned will be built at the site of the exhausted gas field in Banatski Dvor, located 60 kilometers northeast of Novi Sad, Serbia. The gas pipeline construction is due to begin in 2008 or 2009, gas supplies in 2013. The cost of the project is estimated at more than $10 bn.

First Sino-foreign refinery posts heavy losses, seeks govt support

May 12, 2008. Dalian West Pacific Petrochemical Co Ltd, whose investors include PetroChina, Total and Sinochem, has suffered heavy losses due to soaring crude costs and caps on domestic fuel prices, the Caijing magazine reported. According to the company the refinery, the first such Sino-foreign project in China, posted losses of over 1 bn yuan since the beginning of the year, the report said, citing a company official. The Dalian refinery, which was originally allowed to export half of its output, has had difficulty obtaining export licenses, with the government restricting outbound shipments to meet strong domestic demand, the official was quoted as saying. The company is seeking government action to stem the losses, including the sale of diesel at prices in line with international market, the report said.

Bangladesh unable to ensure gas to Tata

May 10, 2008. Bangladesh is likely to inform Indian conglomerate Tata that Dhaka will be unable to guarantee the required gas supply for its proposed USD 3 bn investment projects. The Bangladesh Energy Ministry will ask Tata to submit revised proposals so that instead of gas it can use other raw materials in the projects. According to a Tata Group representatives, conglomerate may agree to review some of the proposals submitted earlier. According to conglomerate, it requires the gas after four years into the signing of the final investment agreement. The government will follow a ‘cautious’ policy in giving new industrial gas connections in and around Dhaka, but has decided not to provide any new gas connection in the Chittagong region.

Morocco reveals strategy to explore oil amid spiking oil prices

May 9, 2008. Morocco government has revealed a four-fold strategy to explore for oil in different parts of the country. The strategy includes boosting the promotion of sedimentary basins, developing partnerships, using new technologies on exploration, and exploiting data relating to sedimentary basins. According to the Energy and Mining Ministry onshore and offshore sedimentary basins are not explored enough in the north African kingdom compared to other countries, adding only four wildcat wells are drilled in 10,000 square kilometers in Morocco, while the international average is of 800 wells in 10,000 square km. The ministry ensured that geological studies and analyses, in addition to two-dimension and three-dimension seismic tests are carried out according to international standards. In early April, Malaysian state company, Petronas, said it was optimistic to find commercially viable reserves of oil and gas in the Moroccan Atlantic coasts. Petronas, which is making exploration operations off the capital Rabat, said the drilling is challenging, but the company remains optimistic and will continue with the evaluation of seismic interpretation. As the only North African country that does not produce oil, the economy of the kingdom has suffered a lot from the surge in global oil prices.

Norway announces APA 2008

May 9, 2008. The Norwegian Ministry of Petroleum and Energy has announced the Awards in Predefined Areas (APA) 2008. With this announcement prospective blocks for exploration activities in mature areas of the Norwegian Continental Shelf (NCS) are being made available to the industry. In APA 2008 the predefined area has been extended with 4 blocks in the Barents Sea, 3 blocks in the Norwegian Sea and 11 blocks in the North Sea compared with the area in APA 2007. The area announced in APA 2008 consists mainly of returned blocks where petroleum activities have previously taken place. The announcement will provide new opportunities to other companies and contribute to a stable level of activity on the NCS. The APA-arrangement is considered important to attract new and smaller companies to the NCS. The purpose of the APA-rounds is to enhance exploration activities in mature areas, where expectations are smaller discoveries that cannot justify an independent development. The deadline for submission of applications is October 3, 2008. Awards of new production licenses is planned to take place late 2008 / early 2009.

Australia awards $425 mn in offshore permits

May 9, 2008. The Australian Ministry for Resources and Energy has awarded nine exploration permits representing a $425 mn investment in Australia's offshore petroleum sector. The enthusiasm of these companies to invest such large sums demonstrates both the attractiveness of Australia as a location for investment, and the highly prospective nature of the country’s petroleum areas. According to the ministry with only about a decade of known oil resources remaining at today's production rates, Australia is looking down the barrel of a $25 bn trade deficit in petroleum products by 2015. That is why the exploration that will take place in these new permits is so vital to the national interest. The new permits cover a range of prospectivities, water depths and play types.



Tenaska sells power plants to International Power

May 12, 2008. Tenaska Capital Management has agreed to sell four power plants to London-based International Power for more than $856 mn. The plants are in Pennsylvania, West Virginia, Ohio and Illinois. The plants were owned by Omaha-based Tenaska’s Tenaska Power Fund investment subsidiary, but private equity firm Warburg Pincus also owned part of the plants in Pennsylvania, West Virginia and Ohio. Those three plants are part of APT Generation.

TransCanada, Arizona utility sign power-supply deal

May 12, 2008. TransCanada Corp jumped into the high-growth western U.S., signing a 20-year deal with Phoenix-based utility Salt River Project, which will buy all the output from TransCanada's planned Coolidge Generating Station there. Canada's biggest pipeline and electricity plant operator said Coolidge - a US$500-million simple-cycle natural gas-fired peaking power facility - will be online by May 2011, and will have a nominal capacity of 575 megawatts. The western U.S. and specifically Arizona represents an attractive growth market in North America for additional power generation and transmission projects. Phoenix-based Salt River Project has the right to extend the contract for an extra 10 years. Construction on the power plant, located 72 kilometres south of Phoenix, is expected to begin late next year. It will receive natural gas from the El Paso Natural Gas and Transwestern pipelines.

Transmission / Distribution / Trade

South Africans electricity usage reduced by 7 percent: Eskom

May 13, 2008. According to the Eskom, South Africans had managed to save up to 7 percent in electricity demand last month. According to the Presidential Special Joint Working group, Load shedding has been suspended on the basis of progress towards meeting the 10 percent savings target and reviewing the most effective approach in achieving sustained savings. It was agreed that an Advisory Council chaired by the President, Thabo Mbeki, will soon be formed to provide implementation of the National Electricity Response Plan. Members of the Council will be leaders from labour, business, government and civil society.

China to build Qinghai-Tibet electricity transmission line

May 10, 2008. China is preparing for the building of a project to transmit thermal power resources from the country's northwest to Tibet Autonomous Region in the southwest to boost local economy. According to initial plan, the 1,100-kilometer long electricity transmission line starts from Golmud in Qinghai Province and ends at Lhasa, regional capital of Tibet, running in the same direction as the Qinghai-Tibet railway.

The transmission line, dubbed as "Qinghai-Tibet electricity route", is a 500KV power transmission line, with the first phase project target of transmitting 6.5 billion kwh annually. The project is expected to be completed and go into operation in 2010. The planned project will be the world's first electricity transmission line above the 5,000 meter altitude. The Xibei Electric Power Design Institute has concentrated on anti-permafrost research in preparation for the project construction, which is expected to be finished in June or July this year. The project can transmit thermal power to meet Tibet's electricity demand for economic development as of 2020.

Policy / Performance

Ukraine ready to export electricity to Lithuania

May 13, 2008. Ukraine is ready to export electricity to Lithuania. The country's President Viktor Yushchenko lauded the two countries' willingness to boost cooperation in the creation of a single energy transit area in the Baltic, Black Sea, and Caspian regions. Following the talks, the Lithuanian and Ukrainian governments signed a memorandum on energy cooperation, as well as other agreements.

Victoria seeks brown coal opportunities with China

May 12, 2008. Victoria State in southwestern Australia, has been seeking brown coal opportunities with China and solving environmental problems by its mining and utilization. While brown coal, a low grade of coal, has been ignored in China because it's not easily exploited. According to the China Coal Information Institute (CCII) it is quite significant for China to exploit brown coal because its energy needs have grown, and Victoria has realized the commercial values of the cooperation. The world's brown coal reserve is estimated at 1,000 billion tons, with 212 billion tons in China. It accounts for about 13 percent of the country's coal, mainly located in the eastern Inner Mongolia autonomous region.

But China has paid little attention to brown coal because of its high moisture content, sometimes as high as 66 percent, and high ash content. It is used as fuel for steam-electric power generation. However, carbon dioxide emissions from brown coal fired plants are generally much higher than for black coal plants. Because of its low energy density, brown coal is also inefficient to transport and often has to be burned in power stations close to the mines, such as in Australia's Latrobe Valley.

Brown coal is not suited for deep underground mining, but for opencast mining (extracting coal from seams at shallow depth), a technique with which China has little experience. According to the CCII the China needs to learn advanced technologies and management experiences from countries which have working on brown coal mining for a long time, such as Australia. Victoria is home to the world's largest known reserves of brown coal. The total brown coal resource in the Latrobe Valley is estimated at 394,000 million tons, with a coal reserve of 50,000 mt. As few other countries in the world which have abundant brown coal reserves, Australia is willing to work with China, focusing on developing new and cleaner ways to extract and use brown coal reserves, as well as carbon capture and storage technologies.

At least 40 developing countries want nuclear power programs

May 12, 2008. At least 40 developing countries, from the Persian Gulf region to Latin America, have recently approached U.N. officials to signal interest in starting nuclear power programs, a trend that proliferation experts say could provide the building blocks of nuclear arsenals in some of those nations.

Much of the new interest is driven by economic considerations, particularly the soaring cost of fossil fuels. According to the U.S. and international nuclear officials for some Middle Eastern states with ready access to huge stocks of oil or natural gas, such as Kuwait, Saudi Arabia and the United Arab Emirates, the investment in nuclear power appears to be linked partly to concerns about a future regional arms race stoked in part by Iran’s alleged interest in such an arsenal.

Although the United Arab Emirates has a proven oil reserve of 100 billion barrels, the world’s sixth-largest, in January it signed a deal with a French company to build two nuclear reactors. Wealthy neighbors Kuwait and Bahrain also planning nuclear plants, as are Libya, Algeria, Morocco and the kingdom of Jordan. Even Yemen, one of the poorest countries in the Arab world, last year announced plans to purchase a nuclear reactor, which it says is needed to produce electricity.

‘Coal-fired power plants pose risks to health’: WHO

May 11, 2008. The World Health Organisation (WHO) said that climate change poses significant health risks and called for lessening reliance on coal-fired power generation. According to a WHO report, a drop in coal-fired power generation will reduce air pollution and associated diseases and deaths. It called for changing the mode of transport and promoting bicycling and walking to reduce pollution and traffic-related injuries and deaths. Production and transportation of food are major emitters of greenhouse gases, the report said.  The report said that global warming would be gradual, but the increasing frequency and severity of extreme weather events, such as storms, heatwaves, droughts and floods, would be abrupt and the consequences would be acute.

Chinese eyeing NSW electricity industry

May 9, 2008. CHINA'S largest power company is eyeing off the NSW government's $15 billion sell-off of the electricity industry. China Huaneng Group has already bought power assets in Queensland and Singapore and now wants to greatly expand its presence in South-east Asia and Australia. The company has asked its "Australian team to follow these reforms and send suggestions back to senior management.

Renewable Energy Trends


GPEC gets $106 mn ADB loan for wind energy projects

May 13, 2008. Gujarat Paguthan Energy Corporation’s (GPEC) wind energy projects in Gujarat and Karnataka will get a loan of up to Rs 445 crore ($105.8 mn) from Asian Development Bank. The bank has given an in-principle approval for the loan which will be used to set up wind farms at Samana in Gujarat and Saundatti in Karnataka totalling 183 MW. The loan will have a maturity of 13 years from the date of the first disbursement. GPEC, which is fully owned by the CLP Group (formerly China Light & Power), will bring in Rs 198 crore ($47 mn) as equity for the projects and other co-lenders will provide loans of Rs 364 crore ($86.5 mn). The Samana project is part of a large wind energy farm being developed by Enercon (India) Ltd, a leading manufacturer of wind turbines, for GPEC and other power producers. Enercon is developing the Saundatti project in Belgaum district exclusively for GPEC. The loan to the wind energy project of GPEC will be the second such project that ADB will be funding in India. In 2007, it approved a Rs 350-crore ($83.2 mn) loan for a 100-MW wind energy project of Tata Power Company in Maharashtra. GPEC owns and operates a 655-MW gas-fired project at Bharuch in Gujarat. The Samana project in Jamnagar district will be fully completed by January 2009, with some turbines being commissioned in April 2008 and others getting installed in stages. The Saundatti project is scheduled to start generating electricity in June 2009. GPEC will sell the electricity generated by the Samana wind farm to the Gujarat Urja Vikas Nigam Ltd, the State-owned electricity holding company in Gujarat. GPEC has a 20-year power purchase agreement with the power utility and will get a tariff of Rs 3.37 a kWh for the period of the agreement. For the Karnataka project, GPEC will get a tariff of Rs 3.40 a kWh from the distribution companies for the first 10 years after which the State electricity regulatory commission will fix the tariff. The Samana and Saundatti projects are the first of the large investments planned by the CLP group in India in the renewable energy sector. CLP is also present in India through a company called Roaring40s, an equal joint venture with Hydro Tasmania of Australia. Roaring40s has set up a 50-MW wind farm in Maharashtra and has announced plans to have 250 MW of wind power capacity in India by 2010.

Coir body for ban on use of coconut husk for power production

May 12, 2008. The Tamil Nadu State Coir Associations' Federation demanded a total ban on use of coconut husk to generate biomass power. The Association is of the view that it will badly hit the labour intensive coir industry and throw hundreds of people out of job.the Association said the government should initiate action against industries using coconut husk for biomass power generation. The Association also requested the central and state governments to provide financial and tehnical assistance for value addition and marketing of coir products. As per the Association the biomass power generation was a threat to the 2.5 lakh coir workers. 

NTPC to set up R&D fund

May 12, 2008. NTPC has decided to allocate 0.5% of distributable profit annually for its “Research and Development Fund for Sustainable Energy”. This fund will be used for sponsoring / undertaking research leading to development of green and clean technologies. The research project may include development of Coal Gasification Technology for commercial use, reducing cost of harnessing Solar Energy, LED lighting, improvement in efficiency of its power stations, etc. As a responsible Corporate Citizen, NTPC is committed to controlling CO2 per unit of power generation with portfolio management, adoption of the state of the art technology with special thrust on the renewable energy sources, develop one million square feet of Green Building Space within NTPC premises by the year 2017, spearhead awareness campaigns nation wide to orient the people, strengthen and leverage the Government’s efforts in this area. With its priority of generating clean power, the long-term focus areas of NTPC shall cover re-powering and replacement of old units, introduction of ultra super critical technology, modifying the fuel portfolio with higher share of renewable, clean coal technologies. The company is undertaking massive afforestation covering vast areas of land in and around its projects and till date it has planted more than 18.37 million trees at its projects. As a result of pursuing sound environment management systems and practices, all NTPC stations have been certified with ISO 14001 and OHSAS 18001 by reputed national and international certifying agencies.

US group Astonfield lines up mega investments

May 10, 2008. US-based Astonfield group of companies has decided to invest Rs 16,000 crore ($3.8 bn) to set up green energy capacities in India, a solar panel manufacturing unit in West Bengal and a WiMax network in rural India. Plans include setting up of renewal generation capacities of 2,000 mw at an investment of Rs 8,000 crore ($1.9 bn) approximately and a solar panel assembly plant at a capex of Rs 6,000 crore over the next two-three years. The Wimax network will be rolled out at an investment of $500 mn. It also plans to approach the equity market with an IPO in 2009. In West Bengal, the group has firmed up plans to invest about $300 mn for setting up green energy generation capacities of 75-80 mw. These include a 10 mw biomass plant, a 5 mw solar energy unit and one mw manure-to-power unit. According to the company out of the proposed 2,000 mw of green energy, about 1,000 mw will be from solar powered generation units, while 800 mw will be from municipal solid waste, bio-mass and bagasse. In Rajasthan and Bihar, the company intends to set up green energy capacities of 260 mw each. In Bihar, the plan is to set up 100 mw of solar energy unit, 50 mw biogas, another 50 mw of bagasse and 60 mw of municipal solid wastes.

Nandan plans eco-zones to make bio-fuel

May 9, 2008. Nandan Biomatrix, a Hyderabad-based agri-biotechnology and medicinal plantation company, is planning to set up bioinvestment eco-industrial zones (BIEZs) across the country. The project aims to bring fallow land under Jatropha cultivation, which will be used to make biofuel. BIEZs would work to achieve energy efficiency. The zones will have farms and laboratories for mass production of plantlets along with nursery production centres, demonstration areas and training centres. It will follow the contract farming model, assuring farmers of buying Jatropha seeds. IL&FS Infrastructure Development Corporation, which is associated with the development of the project, is preparing a feasibility report. The company was targeting cultivation for biofuel on 100,000 hectares. The project will be implemented on a public-private-panchayat partnership model. The model will be replicated abroad, too. The input cost for jatropha cultivation is estimated at Rs 16,000 per acre spread over two years, with expected returns of Rs 12,000 from the third or fourth year of planting. The company signed a memorandum of understanding in this regard with Bharat Petroleum Corporation (BPCL), one of the stakeholders in the project. BPCL will procure the biofuel produced from the BIEZ and will set up refineries for blending requirements. Shapoorji Pallonji (SP), the Germany-based Alphakat and Malaysia's Platinum Energy also have a stake in the project. While SP will be the infrastructure partner, Alphakat will bring in patented technology for producing biodiesel from seeds and Jatropha biomass. Platinum will develop Jatropha catchment areas in Southeast Asia. About Rs 600 crore ($ 144.4 mn) each will be invested in seed development, distribution, processing and other fields. Nandan Biomatrix will cultivate Jatropha on more than 800,000 hectares spread across Gujarat, Maharashtra, Andhra Pradesh, Uttar Pradesh and other states.

Indian industry looks to investing in bio-fuel in South America

May 9, 2008. South America's expertise in bio-fuel could come to the aid of India in meeting its growing energy requirements, with the Indian industry working out investment avenues in the area in the continent. Indian companies are looking at setting up and acquiring integrated bio-fuel plants in Brazil and Mexico. Industry members had serious discussions with their counterparts and would return to tie-up joint ventures and investments in bio-fuels. Ruchi Soya is one of the companies that has decided to go back to Mexico. In oil-rich Brazil, the Indian companies also looked at opportunities in the oil and gas sector. While ONGC Videsh has set up offices in Rio and bought stakes in an oil field, many other oil majors, including ESSAR is looking at opportunities in the South American country. 


Foster Wheeler awarded contract for CFB gasifier for BTL pilot plant

May 12, 2008. Foster Wheeler Ltd.’s Finnish subsidiary Foster Wheeler Energia Oy, part of its Global Power Group, has been awarded a contract by NSE Biofuels Oy Ltd. for a circulating fluidized-bed (CFB) biomass gasifier to be located in Varkaus, Finland. NSE Biofuels Oy Ltd. is a joint venture owned 50/50 by Stora Enso Oyj and Neste Oil Corporation. Foster Wheeler’s scope includes an oxygen/steam gasifier and gas treatment equipment. The plant utilizes Foster Wheeler’s fuel-flexible circulating fluidized-bed gasification technology to convert a wide spectrum of biomass into a clean syngas to be used in a gas to liquids (Fischer-Tropsch) process to produce feedstock for renewable diesel from biomass/wood residue-based gas. The gasification and syngas cleaning system is part of NSE’s new-generation renewable diesel demonstration plant at Stora Enso’s Varkaus Mill in Finland.

REpower consortium wins 954 MW order in Canada

May 7, 2008. The St-Laurent Énergies consortium, with which German wind turbine maker REpower Systems AG has concluded an exclusive option agreement concerning the delivery of wind turbines last year, has been awarded five wind projects by the energy supplier Hydro-Quebec Distribution, representing a total capacity of 954 Megawatts (MW) in the Canadian province of Québec. The consortium is led by EDF Energies Nouvelles (a subsidiary of the electric utility EDF and long-term REpower client) and includes Hydromega Services Inc. (a Québec independent power producer), and RES Canada (international wind farm developer and construction company). On September 18, 2007, the consortium submitted a bid with a total power of 1,048 MW to Hydro-Quebec Distribution which will exclusively be equipped with REpower turbines of the 2-MW class. Once the Power Purchase Agreements (PPA) are finalised between Hydro-Québec and St-Laurent Énergies, the order would be amongst the biggest in the wind industry. The five wind farm projects with a total capacity of 954 MW have in-service dates between December 2011 and December 2015. These five projects represent a total investment in excess of US$2bn and will significantly contribute to the Quebec economy. At least 60% of the total investment, or more than US$1.2bn, will be spent in Quebec, 30% of which are related to the manufacturing of wind turbine components, requiring the fabrication of turbine blades, towers and electrical converters. St-Laurent Energies will finalize PPAs with Hydro-Quebec Distribution in the coming months, each of which must be approved by the Quebec Energy Board. Prior to commencing construction, the consortium must obtain all required governmental permits, approvals and environmental authorizations as well as the appropriate municipal construction permits.

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